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Recursive Thick Modeling and the Choice of Monetary Policy in Mexico

  • Arnulfo Rodriguez


    (Economic Studies Division Bank of Mexico)

  • Pedro N. Rodriguez

    (Universidad Complutense de Madrid)

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    By following the spirit in Favero and Milani (2005), we use recursive thick modeling to take into account model uncertainty for the choice of optimal monetary policy. We consider an open economy model and generate multiple models for only the aggregate demand and aggregate supply. Models are constructed by matching the rankings of aggregate demand and aggregate supply and adding other specifications for the rest of the variables. The main results show that recursive thick modeling with equal and different weights approximates the recent historical behavior of nominal interest rates in Mexico better than recursive thin modeling

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    Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2006 with number 30.

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    Date of creation: 04 Jul 2006
    Date of revision:
    Handle: RePEc:sce:scecfa:30
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    1. Giordani, Paolo & Söderlind, Paul, 2002. "Solution of Macromodels with Hansen-Sargent Robust Policies: Some Extensions," SSE/EFI Working Paper Series in Economics and Finance 499, Stockholm School of Economics, revised 15 May 2003.
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    12. Favero Carlo A. & Milani Fabio, 2005. "Parameter Instability, Model Uncertainty and the Choice of Monetary Policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-33, February.
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